By Richard Beales in New York, Krishna Guha in Washington and Chris Giles in London
from The Financial Times

US equities staged a late recovery on Thursday after the London stock market tumbled more than 4 per cent, its biggest one-day fall since March 2003, as a flight from risky assets fueled further market turmoil around the world.

The FTSE index closed 250.4 points lower at 5,858.9, falling below the 6,000 level and hitting its lowest levels since September 2006. Financial and mining stocks suffered most.

There was some relief later when US stocks rebounded from steep early losses to close mixed. The S&P 500 index ended 0.3 per cent higher, powered by a late rally in financial stocks.

Michael Mayo, Deutsche Bank analyst, said that US bank and brokerage stocks rose on speculation that the Federal Reserve would cut interest rates in response to credit market turmoil.

The sell-off prompted the Treasury, in its first comments since the crisis began, to try to reassure investors and the public that the underlying UK and world economies remained sound.

“There will always be periods of uncertainty in the markets but the long-term decisions the government has taken - giving independence to the Bank of England, the fiscal rules and low and stable borrowing - have created a strong platform of economic stability,” it said.

The falls in London came as European indices suffered triple-digit falls, with France’s CAC 40 index down 3.3 per cent and Germany’s DAX down 2.4 per cent. Asian stock markets posted sharp declines. Tokyo’s Nikkei 225 index fell 2 per cent, while the Korean Kospi fell nearly 7 per cent.

read more HERE